Traders
work
on
the
floor
of
the
New
York
Stock
Exchange
during
afternoon
trading
on
June
03,
2024
in
New
York
City.
Michael
M.
Santiago
|
Getty
Images
May’s
surprising
pace
of
job
growth
and
wage
rise
added
to
the
conviction
that
the
Federal
Reserve
will
stay
on
hold
through
this
summer
and
possibly
beyond.
The
Bureau
of
Labor
Statistics
reported
Friday
that
nonfarm
payrolls
increased
by
272,000
for
the
month,
considerably
higher
than
the
Wall
Street
consensus
of
190,000
and
well
above
April’s
comparatively
muted
gain
of
165,000.
In
addition,
average
hourly
earnings
rose
4.1%
over
the
past
12
months,
more
than
expected.
Beyond
signaling
a
still-vibrant
labor
market,
the
data
at
the
very
least
adds
to
the
narrative
that
the
Fed
doesn’t
have
to
rush
to
lower
interest
rates.
As
inflation
runs
above
the
central
bank’s
2%
target,
there’s
scant
evidence
that
higher
rates
are
endangering
broad
metrics
of
economic
growth.
“I’ve
been
a
little
flummoxed
at
the
parlor
game
of
when
will
the
Fed
start
cutting,”
said
Liz
Ann
Sonders,
chief
investment
strategist
at
Charles
Schwab.
“I’ve
been
more
in
the
camp
that
neither
of
the
components
of
the
Fed’s
dual
mandate
are
pointing
to
the
need
to
start
cutting,
and
higher-for-longer
means
nothing
could
happen
this
year.”
The
Fed’s
“dual
mandate”
entails
maintaining
both
full
employment
and
stable
prices.
Even
with
the
unemployment
rate
rising
to
4%
in
May,
the
labor
market
appears
vibrant.
However,
on
the
other
side
of
the
mandate,
inflation
is
still
running
well
above
the
Fed’s
target.
Most
gauges
have
prices
rising
annually
at
about
a
3%
rate,
down
significantly
from
the
peaks
of
mid-2022
but
still
running
hot.
Lowering
expectations
Following
the
jobs
numbers,
futures
traders
cut
bets
on
rate
cuts.
Pricing
in
fed
funds
futures
pointed
to
almost
no
chance
of
a
reduction
at
either
the
Federal
Open
Market
Committee’s
meeting
next
week
or
on
July
30-31.
From
there,
pricing
indicates
about
a
50-50
chance
of
a
September
move,
and
only
about
a
46%
probability
that
the
Fed
will
follow
up
with
a
second
cut
before
the
end
of
the
year,
according
to
the
CME
Group’s
FedWatch
measure
Friday
afternoon.
All
of
those
probabilities
were
down
sharply
from
Thursday
levels.
Investors,
though,
shouldn’t
get
too
pessimistic,
according
to
Rick
Rieder,
chief
investment
officer
of
global
fixed
income
for
money
management
giant
BlackRock.
He
pointed
to
softness
in
demand
for
workers
as
shown
by
a
report
earlier
this
week
indicating
that
job
openings
are
continuing
to
decelerate.
Moreover,
the
household
survey,
which
is
used
to
calculate
the
unemployment
rate,
showed
a
decrease
in
employment
of
408,000
and
a
continuing
trend
of
part-time
employment
far
outpacing
full-time
positions.
“And
thus,
the
Federal
Reserve’s
mandate
of
price
stability
and
full
employment
comes
very
much
into
balance,”
Rieder
wrote
in
a
post-report
analysis.
“With
these
conditions,
the
Fed
can
lower
the
Fed
Funds
rate
from
very
restrictive
territory
to
merely
restrictive
positioning.”
“We
believe
the
Committee
can
still
start
cutting
the
policy
rate
by
25
basis
points
at
its
September
meeting,
with
a
desire
to
get
one
more
cut
done
this
year,
but
inflation
readings
from
here
need
to
be
supportive
of
this,”
he
added.
Similarly,
Citigroup,
long
above
consensus
on
Wall
Street
as
the
firm
continued
to
expect
aggressive
rate
cuts,
said
it
now
sees
the
Fed
not
moving
until
September
but
then
continuing
to
cut
rates
from
that
point.
“The
jobs
report
does
not
change
our
view
that
hiring
demand,
and
the
broader
economy,
is
slowing
and
that
this
will
ultimately
provoke
the
Fed
to
react
with
a
series
of
cuts
beginning
in
the
next
few
months,”
Citigroup
economist
Andrew
Hollenhorst
wrote.
